In view of the need of promote and sustain capital market amid the Covid-19 pandemic, the government has offered bonds worth Nu 3 billion (B) with a maturity period of three years for public subscription.
While the bond will support government spending, it is a secure investment option for those who are looking for a regular return, as the finance ministry will pay coupon (interest) on a half yearly basis.
The minimum value of investment has been fixed at Nu 1,000 (face value) while the maximum limit has not been specified.
The submission of subscription applications opened from September 7 and will close at 12PM of September 22.
The annual coupon (interest) rate of the bond is 6.5 percent. The interest earned from the bonds is non-taxable for PIT.
However, the interest income from the bond is taxable income (5 percent as TDS) for the BIT and CIT paying entities. The maturity date is September 26, 2023, on which the principal amount and final interest will be paid.
The main objectives of issuing the bonds include creating opportunities for domestic investors and domestic liquidity management during liquidity shortfall in the economy.
This is the first time that the government is raising financing through long-term bonds after the finalisation of the rules and regulations for issuance of government bonds in June this year.
According to the finance ministry, the government has been raising much of its financial requirements through external concessional borrowings. However, the government has started to resort to domestic and international markets to fund development projects.
The government plans to issue long-term bond on a regular basis to develop the bond market.
The ministry expects that the bond will benefit investors in meeting their long-term investment needs.
The bonds are offered for public subscription through the Royal Monetary Authority (RMA).
The government is expected to issue bonds of the maturity period ranging from three years to seven years during the fiscal year 2020-21.
“Against these imperatives, the government and the Royal Monetary Authority (RMA) urge all the potential investors to participate in promoting domestic bond market and support the economy in fighting the pandemic,” the RMA has notified.